A massive trove of leaked document shows how Apple went shopping for a new tax haven

Apple CEO Tim Cook looks on during an Apple special event at the Steve Jobs Theatre on the Apple Park campus on September 12, 2017 in Cupertino, California.
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Leaked documents have revealed how Apple went shopping around for a tax haven in 2014.

It looked for a country with low taxes, discretion, and a stable political environment.

It ultimately chose Jersey in the Channel Islands, the Paradise Papers have reveled.

What makes a good tax haven? Alongside the obvious — a low corporate tax rate — discretion for the company trying to minimise its tax bill is important. As is a lack of signs that the country's laws might change unfavourably any time soon. And even if the company can get an "official assurance of tax exemption" — even better!

This week, the "Paradise Papers" papers began to be published — a massive trove of leaked documents detailing how the global elite aggressively seek to lower their tax bills using offshore accounts. Names ranging from Queen Elizabeth II to Bono have made headlines as tax affairs of the rich and famous come under scrutiny.

The leak also provides a fascinating insight into the tax affairs of Apple, and what the world's most valuable company looked for when it went shopping around for a tax haven.

In 2014, Apple was facing political pressure over its corporate structure and the "tax residency" of some of its Irish subsidiaries that hold most of its huge cash reserves — now more than $250 billion (£190 billion). It went hunting for a jurisdiction in which to locate them, the International Consortium of Investigative Journalists reports, issuing a questionnaire of sorts for tax havens around the world.

Apple's law firm, Baker MacKenzie, had 14 questions for offshore law firm Appleby as it looked at its offices in the Cayman Islands, the British Virgin Islands, Bermuda, the Isle of Man, Guernsey and Jersey. This document isn't publicly available in its entirety — but portions have been republished by the ICIJ, the BBC, and elsewhere. Some of the questions Apple had included:

"Confirm that an Irish company can conduct management activities ... without being subject to taxation in your jurisdiction.

"What information is publicly visible (e.g. through the companies registry or equivalent) when a company is registered in your jurisdiction.

"Is it possible to obtain an official assurance of tax exemption, and if so what is involved in obtaining it, including costs? How long does the assurance last?

"Are there any developments suggesting that the law may change in an unfavourable way in the foreseeable future?

"Is there a credible opposition party or movement that may replace the current government?"

Meanwhile, an internal email written by an Appleby employee show just how secretive Apple can be. They wrote:

"Finally, for those of you who are not aware Apple is extremely sensitive concerning publicity and do not generally permit their external counsel to disclose they have been engaged by Apple or to make any mention (not even generically in promotional material to the relevant engagement). They also expect the work that is being done for them only be discussed amongst personnel who need to know. Please bear this in mind going forward."

Collectively, the leaked documents paint a picture of a company looking for a jurisdiction where it would pay low or non-existent taxes, and could operate with discretion in a stable political environment unlikely to change suddenly.

Ultimately, Jersey was the winner, and Apple reportedly moved the tax residency of the Irish subsidiaries to the Channel Island in 2015.

Apple has said that its arrangements are legal and it pays all the taxes it owes. "We're proud of the economic contributions we make to the countries and communities where we do business," it said in a lengthy statement.

"When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we've paid $1.5 billion in tax there — 7 percent of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced."